Company Portfolio

Name Chairman
President & CEO

: Carrington Laboratories Inc. : George DeMott.

: Dr. Carlton E. Turner.

VP & CFO Office Telephone Website Description

: Robert W. Schnitzius : 2001 Walnut Hill Lane, Irving, Texas 75038. : (972) 518-1300. : www.carringtonlabs.com. :

Incorporated in Texas in 1973, it is a research-based biopharmaceutical, medical device, raw materials and nutraceutical company engaged in the development, manufacturing and marketing of naturally-derived complex carbohydrates and other natural product therapeutics for the treatment of major illnesses, the dressing and management of wounds and nutritional supplements. Their research and proprietary product portfolios are based primarily on complex carbohydrates isolated from the Aloe vera L. plant. Their operations are comprised of three business segments: their Medical Services Division, their Consumer Services Division and DelSite Biotechnologies Inc., or DelSite. They sell prescription and nonprescription medical products through our Medical Services Division and provide manufacturing services to customers in medical markets. Through their Consumer Services Division, they sell consumer and bulk raw material products and also provide product development and manufacturing services to customers in the cosmetic and nutraceutical markets. DelSite, their wholly-owned subsidiary, operates independently from our research and development program and is responsible for the research, development and marketing of our proprietary GelSite technology for controlled release and delivery of bioactive pharmaceutical ingredients.

Medical Services Division Their Medical Services Division offers a comprehensive line of wound management products. Their products are used in a wide range of acute and chronic wounds, for skin conditions and incontinence care. The primary marketing emphasis for their wound and skin care products is directed toward hospitals, nursing homes, alternate care facilities, cancer centers, home health care providers and managed care organizations. The wound and skin care product lines are being promoted primarily to physicians and specialty nurses, for example, enterostomal therapists.

Consumer Services Division Their Consumer Services Division markets and licenses products in three distinct categories in the health and beauty markets: Bulk Raw Materials, Specialty Manufacturing Services and Finished Consumer Products. The Bulk Raw Materials category is comprised of proprietary bulk raw materials produced from Aloe vera L. utilizing their patented alcohol-precipitation method. The premier product is Manapol[R] powder, a bulk raw material that contains greater than 60% polymeric polysaccharides. Manapol[R] powder is marketed to manufacturers of food and nutritional products who desire quality, clinically-proven ingredients for their finished products that can carry a structure/function claim for immune system enhancement. In addition to Manapol[R] powder, their Consumer Services Division markets the bulk raw material Hydrapol[TM] powder to manufacturers of bath, beauty and skin care products. Hydrapol[TM] powder is currently the only raw material from Aloe vera L. that has the International Nomenclature Cosmetic Ingredient (INCI) name of Aloe Barbadensis Leaf Polysaccharides. They are also developing additional bulk raw materials to expand their market presence and increase opportunities to sell their products to other potential customers.

Company Strategy

The strategy is to continue to grow as a research-based biopharmaceutical company focused on offering quality products to customers and potential partners. Key aspects of the strategy are to: increase revenues by offering innovative new products, growing existing product lines and continuing to offer exceptional customer service; increase profitability by continuing to improve operational efficiency, working capital management and modernization of equipment; enlarge and diversify customer base to reduce dependence on a limited number of significant customers; develop and market the proprietary GelSite polymer technology for delivery of vaccines and therapeutics; enter into strategic partnerships and collaboration arrangements related to the GelSite technology; and continue to develop the knowledge of polymers and their relationship to vaccines and bioactive protein and peptide therapeutics.

Patents & Proprietary

Patents and Proprietary Rights As is industry practice, they have a policy of using patents, trademarks and trade secrets to protect the results of their research and development activities and, to the extent it may be necessary or advisable, to exclude others from appropriating our proprietary technology. Our policy is to protect aggressively their proprietary technology by seeking and enforcing patents in a worldwide program. The patents in the table below support, in part, the products and production processes for their proprietary bulk raw materials which are used in their advanced wound care products and
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nutritional supplements, as well as sold in bulk to manufacturers of other products. Inventions in these patents provide many of the products in both the Medical Services and Consumer Services Divisions with a vital differentiation in the marketplace because of the production processes which maintain the original complex polymeric carbohydrates intact. Some of their patents are mentioned. Except these they also have more patents in different countries.
Title PROCESS FOR PREPARATION OF ALOE PRODUCTS

Country Code United States

Patent No. 4,957,907

Issue Date 9/18/1990

PROCESSES FOR PREPARATION OF ALOE PRODUCTS, PRODUCTS PRODUCED THEREBY AND COMPOSITIONS THEREOF

United States

4,959,214

9/25/1990

PROCESSES FOR PREPARATION OF ALOE PRODUCTS, PRODUCTS PRODUCED THEREBY AND COMPOSITIONS THEREOF DRINK CONTAINING MUCILAGINOUS POLYSACCHARIDES AND ITS PREPARATION BIOACTIVE FACTORS OF ALOE VERA PLANT BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE

United States

4,966,892

10/30/1990

United States

5,443,830

8/22/1995

United States United States

5,902,796 5,925,357

5/11/1999 7/20/1999

Turkey

1482911

10/17/2007

DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF PROCESS FOR PREPARATION OF ALOE PRODUCTS, PRODUCTS PRODUCED THEREBY AND COMPOSITIONS THEREOF DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS BIOACTIVE FACTORS OF ALOE VERA PLANT BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF BIOACTIVE FACTORS OF ALOE VERA PLANT

Switzerland

1482911

10/17/2007

Sweden

0966294

5/28/2003

Spain

556686

12/16/1987

Spain

1482911

10/17/2007

South Korea South Korea South Korea Singapore

62182 419354 524217 51748

2/15/1993 2/6/2004 10/20/2005 6/20/2000

DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS

Portugal

1482911

10/17/2007

Netherlands Netherlands

0356484 1482911

10/20/1993 10/17/2007

Italy Hungary

0966294 1482911

5/28/2003 10/17/2007

Great Britain

0356484

10/20/1993
5

BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS BIFURCATED METHOD TO PROCESS ALOE WHOLE LEAF DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS, PRODUCTS PRODUCED THEREBY AND COMPOSITIONS THEREOF PROCESS FOR PREPARATION OF ALOE PRODUCTS PROCESS FOR PREPARATION OF ALOE PRODUCTS DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE PROCESS FOR PREPARATION OF ALOE PRODUCTS

Great Britain Great Britain

0966294 1482911

5/28/2003 10/17/2007

Germany Germany Germany

P68910051 69815071.6 1482911

10/20/1993 5/28/2003 10/17/2007

France

0356484

10/20/1993

France France Czech Republic

0966294 1482911 1482911

5/28/2003 10/17/2007 10/17/2007

Canada

1305475

7/21/1992

Canada Belgium Belgium

1,312,860 0356484 1482911

1/19/1993 10/20/1993 10/17/2007

Austria

0356484

10/20/1993

DISPERSED SOLIDCONTAINING COMPLEX CARBOHYDRATE BIOACTIVE FACTORS OF ALOE VERA PLANT

Austria

1482911

10/17/2007

Australia

734450

9/27/2001

Case Overview THE PATTERSON OPERATION

Background Carrington, Inc. is an international company engaged in the production and distribution of pharmaceuticals, proprietary drugs, and cosmetics and toiletries. In its worldwide operations, Carrington employs over 15,000 people and has sales of over $500 million annually. At the mid-south plant of Carrington, Inc. management was faced with problems of low productivity, low employee morale, and high unit costs in the section responsible for the assembly of various kinds of packages containing assortments of different products made by the company. These prepaks or deals as they are referred to within the organization, are specifically prepared to the specifications of the individual customer. Each package may contain from 24 to 480 items, and the total number of packages for a customer may range from 10 to 1500 units. Most of these packages are prepared in such a way that the retailer can set them up as freestanding, point-of-sale promotional displays. From carringtons standpoint, the objective of using these product displays was to create additional shelf space for Carringtons products. In the stores these displays could be placed in aisles or used as shelf extenders. Assembling the deals is essentially a jobshop type process, and prior to last year, the assembly room was located in a part of the main plan known as Section 10. The employees in Carringtons manufacturing and assembly operations are unionized and the firm uses a Halsey 50-50 Incentive Plan, a time-saved bonus plan. Under the Halsey Plan, if a worker can do his job in less than the standard time, he receives a bonus of 50 percent of the hourly wage rate multiplied by the time saved. For example, an employee who completed 10 standard hours of work in 8 hours would be paid for 8 hours plus 1 of the 2 hours saved. Thus, if the hourly pay rate were $8.50, the worker would earn $76.50 for the day. Problems with Section 10

The assembly of prepaks in Section 10 utilized roller-type conveyor belts which supplied each worker with the products to be included in a particular package. The working conditions were outstanding in that the work area was very clean, well lighted, and air conditioned. An attractive cafeteria for employee use was available in the same large building.

In spite of good working conditions and the change to earn extra pay through the companys incentive system, the operation in Section 10 had encountered a marked trend of increases in unit costs and decreases in output per labour hour. In fact, during the last three years cost figures revealed that the section was below the break-even point. Contributing to this deteriorating situation was low productivity and failure of employees to meet the work standard. This latter problem was made particularly evident by the fact that noemployees were able to earn a bonus under the incentive plan. Discipline in Section 10 was poor and supervisors were constantly having problems. A number of grievances had been generated. Morale was not helped by the fact that any employee quite often found himself being moved from one assembly line to another. This tended to increase production costs because the employees had little chance of moving down a particular learning curve before being moved to another operation. Another factor indicative of low morale was the employees attitudes. There was no spirit of mutual cooperation and the attitude of thats not my job was prevalent. All in all, working in Section 10 was considered an unpopular work assignment. The work required manual labour and was perceived as relatively hard work compared to the automated lines in the other work areas. Also, word had spread that no one could make bonus working there. Eventually, through the bidding system used by the organization, the work force in Section 10 came to consist, in large part, of young inexperienced employees, problem workers, and malcontents. As one manager described the situation, Section 10 had the pits of the work force. A new operation Early last year management at Carrington was confronted with a severe space problem for its expanding manufacturing and assembly operations. Several alternatives were considered, but none seemed to offer a solution to the space problem that was economically feasible. In a sense of near desperation, a brainstorming session of managers led to a decision to move a large part of the assembly of the deals to a facility already leased by the company, presently used as a warehouse. This facility was located on Patterson Street and for this reason the new deal room became known in the company as the Patterson Operation.

The new facility fell far short of providing workspace and conditions comparable to those in Section 10. The building was located in an entirely separate area approximately 3 miles from the main plant in a neighbourhood of run-down, low-income housing and other warehouse operations. The building housing the Patterson operation had been thought to be acceptable only for warehouse use. It was an older brick structure with a number of large open bays for shipping and receiving. The building was dark, poorly ventilated, not air conditioned, and inadequately heated. It was poorly suited for use by workers involved in assembly operations. Temperatures averaged approximately 50 degrees during the winter months and well over 90 degrees in the summer. There was no cafeteria or food service, and employees either brought their own lunch or went to a small neighbourhood grocery in the vicinity and bought food. Other worker facilities such as restrooms and break areas were poor. In summary, working conditions contrasted sharply with Section 10 and its clean, air-conditioned, well-heated facilities in a good neighbourhood and with a first-class company cafeteria available. Despite these tremendous obstacles and seemingly against their best judgement, management, pressed for manufacturing space, had decided on the move to the Patterson warehouse. Little money was spent on modifications of the Patterson facility. Results of the move Moving to Patterson involved the transfer of approximately 40 employees from the main plant, most of whom were blacks with low seniority. Under the new structure, all of these workers were managed by Fred Hammond, a black first-liner supervisor. As foreman, Fred made some drastic changes in the assembly operation. He set up the assembly line so that individual workers could work on the same job until that particular order was completed. The situation was entirely different from Section 10 where an employee could work on as many as three different assemblies during a day time. Of course, the repetition of working on the same line enabled workers to develop speed, which facilitated their earning bonuses. The new foreman introduced some other innovations. He allowed employees the opportunity to influence decisions concerning their work hours and the times of their rest breaks. While at the main plant the playing of radios in a production areas was not permitted, at Patterson it gradually became acceptable to have radios tuned to disco or soul music, usually playing at a high volume level. Other non-standard conditions existed at Patterson. Unlike Section 10, employees did not have to observe dress codes, wear bonnets, or refrain from wearing jewelry on the job. Because of the rather remote location of Patterson off the main plant site, managers or supervisors from the plant visited the new facility rather infrequently. Where violations of certain company policies existed, a somewhat liberal attitude was taken by management. In order to have some place to eat or to take a break the employees got together and furnished a small room with enough tables and chairs to modestly equip a rather austere dining and rest
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break area. Eventually this room was air conditioned. At the time the case was written the employees were attempting to get the company to furnish some paint so that they could repaint the room. With these and other changes a shift in worker attitudes began to evolve. Employees came to view Patterson as their own company. A feeling of mutual cooperation became prevalent as evidenced by the willingness of individual workers to assist others when possible. An esprit de corps developed among the Patterson workers. Productivity increased to such an extent that employees were receiving bonuses which had very seldon been the case in the old location. The jobs at Patterson became more popular and the composition of the work force there gradually changed from one of inexperienced and dissatisfied workers to one in which older and better qualified people (black and white) began to actively bid for the jobs. Since the Patterson operation was opened, there has been only one grievance field and during the first year of operation there was a 32.8 percent increase in productivity over Section 10. Since the inception of the Patterson operation, Fred Hammond, the first-line supervisor initially in charge, has been promoted and was replaced by May Allison, who has continued to run the operation in the same manner as Hammond. To an outside observer, it is rather amusing to watch this young lady, who stands less than five feet tall and weighs approximately 100 pounds, in her supervisory relationship with the work force, particularly the burly male employees and the older women workers. It is apparent that she has been able to earn the respect and admiration of the employees and has developed effective work relationships with them. Recent data indicates higher productivity and more bonuses at Patterson than in comparable work in the main plant. May is well-liked personally as evidenced by employee contributions of about $75.00 for her birthday gift. May has continued to get the employees to participate in decision making as, for example, the decision to change work hours at Patterson during the summer months from 5.30 am to 2.00 pm rather than 7.30 to 4.00 pm in the other plant areas. This was initiated because of the nearly unbearable heat of the late afternoon in the warehouse. This change in work schedule, in actuality, was not in accordance with company policy, but has been tolerated by management. The workers at Patterson really preferred an even earlier work day, but this was not feasible due to coordination problems in receiving goods from the main plant. Another interesting development at Patterson is the formation of their own softball team called the Patterson Warriors. At the time of this writing, the team was in second place in a city-wide tournament. Normally, the company will field a team composed of players from all units instead of from one particular section. Again, Patterson employees did this independently without reference to overall company personnel policy. Work records at the Patterson operation concerning absenteeism, tardiness, and turnover are not better than in the main plant. In a few cases they are slightly worse, although this difference is not considered to be significant by management. However, the very low grievance rate, the high

10

level of worker morale, and the better productivity at Patterson are pleasant surprises to management. The activities of the Patterson operation are fairly well-known among the managers at the MidSouth plant of Carrington. Management reactions range from positive to negative with some managers ambivalent about Patterson. All, however, seem to agree that it is at least, interesting.

Problems of the study

1. Has the Patterson operation been successful? To the degree that it can be judged a success, what factors have contributed to it? 2. Identify the leadership styles of Fred Hammond and May Allison. Apply several of the leadership models to the case, such as Fiedlers contingency model and the HerseyBlenchard situational model. 3. Comment on the informal organization at Patterson. In what ways did the employees create their own company? 4. Review Herzbergs two-factor model. Why didnt the change in physical working conditions (a deterioration of a hygiene factor) have a negative effect on productivity? What did cause the workers to be productive?

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Solutions from the study

Question-1: Has the Patterson operation been successful? To the degree that it can be judged a success, what factors have contributed to it? Answer : From the study, we have learnt that due to low productivity, low employee morale and high unit costs, the Section 10 was turned to The Patterson Operation. Because inspite of outstanding working condition at Section 10: neat & clean, well lighted, air-conditioned, attractive cafeteria in the large main plant with Halsey 50-50 Incentive Bonus Plan, the unit cost increased and output per labor hour decreased. In fact, during the last three years cost figures revealed that the section was below the break-even point. For poor discipline and ineffective supervisors more problems were arose. There were no spirit of mutual co-operation. For also some more problems, the operation was failed at Section 10 and forced to turn to The Patterson Operation. But though the building house of the Patterson Operation was an old brick structure, dark, poorly ventilated, not air-conditioned, inadequately heated without cafeteria, rest rooms, but it was able to bring out some positive output. The Pattreson Operation was succeed due to following factors: New assembly line: As foreman, Fred Hammond (an african-american first-line supervisors) set up the assembly line so that individual workers could work on the same job untill that particular order was completed. The situation was entirely different from Section 10 where an employee could work on as many as three different assemblies
12

during a day time. Of course, the repetition of working on the same line enabled workers to develop speed, which facilitated their earning bonuses. Democracy: He allowed employees the opportunity to influence decisions concerning their work hours and the times of their rest breaks. Employees got freedom or democreatic rights to say something about themselves Entertainment: At the main plant the playing of radios in a production areas (Section 10) was not permitted as well as there was no facility to be entertained. But at Patterson it gradually became acceptable to have radios tuned to disco or soul music, usually playing at a high volume level.

Indefinite uniform: Employees did not have to observe dress codes, wear bonnets, or refrain from wearing jewelry on the job. Because of the rather remote location of Patterson off the main plant site, managers or supervisors from the plant visited the new facility rather infrequently. Unionization: The employees became united at The Patterson Operation. They formatted their own softball team, called the Patterson Warriors. They co-operated themselves to accomplish their tasks.

For the contribution of above factors The Patterson Operation was able to succeed.

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Question 2: Identify the leadership styles of Fred Hammond and May Allison. Apply several of the leadership models to the case, such as Fiedlers contingency model and the Hersey-Blenchard situational model. Answer: Leadership is the process of influencing others to achieve organizational goals. An effective leader inspires people to direct their efforts toward goal accomplishment. Again, the leadership style is the way by which the leader influences followers. We can classify the leadership style in following way:
Leadership style

Power Based Leadership

Motivation Based Leadership

Applicable Leadership
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Autocratic

Positive

Job oriented

Democratic Negative Free-rein Employee oriented

Leadership style of Fred Hammond: According to the power based leadership style, Fred Hammond followed the Democratic leadership where the leaders take decisions by consulting with the followers and the advices of the followers are considered with great importance. From the study, we have seen that Fred allowed employees the opportunity to influence decisions concerning their work hours and the times of their rest breaks. According to motivation based leadership style, Fred followed the Positive Leadership where leaders directs the employees with creating encourage and interest.Fred allowed Radio in the workplace, there was no definite uniform and bindings to wear jewelries. According to the applicable leadership style, Fred followed the Employee-oriented leadership where the psychological side of the employees are preferred and leader always tries to solve the employees problem with sympathy. Leadership style of May Allison: According to the power based leadership style, May Allison followed the Free-rein leadership where the leaders give the full freedom to the employees. What to do, how to do the tasks are depend on the employees. May has continued to get the employees to participate in decision making as, for example, the decision to change work hours at Patterson during the summer months from 5.30 am to 2.00 pm rather than 7.30 to 4.00 pm in the other plant areas.
15

Again, Patterson employees did this independently without reference to overall company personnel policy. According to motivation based leadership style, May followed the Positive Leadership where leaders directs the employees with creating encourage and interest. According to the applicable leadership style, May followed the Employee-oriented leadership where the psychological side of the employees are preferred and leader always tries to solve the employees problem with sympathy.

Application of Fiedlers Contingency Model to the case Review of Fiedlers Contingency Model: The Fiedler Contingency Model was created in the mid-1960s by Fred Fiedler, a scientist who helped advance the study of personality and characteristics of leaders. Keep in mind that Fielder isn't using the word "contingency" in the sense of contingency planning. Here, "contingency" is a situation or event that's dependent on someone, or something else. The model states that there is no one best style of leadership. Instead, a leader's effectiveness is based on the situation. This is the result of two factors "leadership style" and "situational favorableness" (later called "situational control").
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Leadership style Identifying leadership style is the first step in using the model. Fiedler believed that leadership style is fixed, and it can be measured using a scale he developed called Least-Preferred CoWorker (LPC) Scale (see Figure 1). The scale asks you to think about the person who you've least enjoyed working with. This can be a person who you've worked with in your job, or in education or training. You then rate each factor based on this person and add up your scores. If your total score is high, you're likely to be a relationship-orientated leader. If your total score is low, you're more likely to be task-orientated leader. Figure 1: Least-Preferred Co-Worker Scale Unfriendly Unpleasant Rejecting Tense Cold Boring Backbiting Uncooperative Hostile Guarded Insincere Unkind Inconsiderate Untrustworthy Gloomy Quarrelsome 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 5 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 6 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 7 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 8 Friendly Pleasant Accepting Relaxed Warm Interesting Loyal Cooperative Supportive Open Sincere Kind Considerate Trustworthy Cheerful Harmonious

The model says that task-oriented leaders usually view their LPCs more negatively, resulting in a lower score. Fiedler called these low LPC-leaders. He said that low LPCs are very effective at completing tasks. They're quick to organize a group to get tasks and projects done. Relationshipbuilding is a low priority. However, relationship-oriented leaders usually view their LPCs more positively, giving them a higher score. These are high-LPC leaders. High LPCs focus more on personal connections, and they're good at avoiding and managing conflict. They're better able to make complex decisions.
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Situational Favorableness Next, you determine the "situational favorableness" of your particular situation. This depends on three distinct factors:

Leader-Member Relations This is the level of trust and confidence that your team has in you. A leader who is more trusted and has more influence with the group is in a more favorable situation than a leader who is not trusted. Task Structure This refers to the type of task you're doing: clear and structured, or vague and unstructured. Unstructured tasks, or tasks where the team and leader have little knowledge of how to achieve them, are viewed unfavorably. Leader's Position Power This is the amount of power you have to direct the group, and provide reward or punishment. The more power you have, the more favorable your situation. Fiedler identifies power as being either strong or weak.

Applying the Fiedler Contingency Model

Step 1: Identify your leadership style

Think about the person who you've least enjoyed working with, either now or in the past. Rate your experience with this person using the scale in Figure 1, above. According to this model, a higher score means that you're naturally relationship-focused, and a lower score means that you're naturally task-focused.

Step 2: Identify your situation Answer the questions:

Are leader-member relations good or poor? Is the task you're doing structured, or is it more unstructured, or do you have little experience of solving similar problems? Do you have strong or weak power over your team?

Step 3: Determine the most effective leadership style Figure 2 shows a breakdown of all of the factors we've covered: Leader-Member Relations, Task Structure, and Leader's Position Power. The final column identifies the type of leader that Fiedler believed would be most effective in each situation.
18

Figure 2: Breakdown of Most Effective Leader Style

Leader-Member Relations Good Good Good Good Poor Poor Poor Poor Task Structure Structured Structured Unstructured Unstructured Structured Structured Unstructured Unstructured Leader's Position Power Strong Weak Strong Weak Strong Weak Strong Weak Most Effective Leader Low LPC Low LPC Low LPC High LPC High LPC High LPC High LPC Low LPC

For instance, imagine that you've just started working at a new company, replacing a much-loved leader who recently retired. You're leading a team who views you with distrust (so your LeaderMember Relations are poor). The task you're all doing together is well defined (structured), and your position of power is high because you're the boss, and you're able to offer reward or punishment to the group. The most effective leader in this situation would be high LPC that is, a leader who can focus on building relationships first. Or, imagine that you're leading a team who likes and respects you (so your Leader-Member relations are good). The project you're working on together is highly creative (unstructured) and your position of power is high since, again, you're in a management position of strength. In this situation a task-focused leadership style would be most effective.

Application of Hersey-Blanchard situational model

Review of The Hersey-Blanchard situational Model: The Hersey-Blanchard Situational Leadership Theory, is a leadership theory conceived by Paul Hersey, a professor who wrote a well known book Situational Leader and Ken Blanchard, author of The One Minute Manager, while working on the first edition of Management of Organizational Behavior (now in its 9th edition). The Theory was first introduced as "Life Cycle Theory of Leadership". During the mid 1970's "Life Cycle Theory of Leadership" was renamed "Situational Leadership theory".

19

In the late 1970s/early 1980s the authors both developed their own Models using the Situational Leadership theory; Hersey - Situational Leadership Model and Blanchard et al. Situational Leadership II Model. The fundamental underpinning of the Situational Leadership Theory is that there is no single best style of leadership. Effective leadership is task-relevant, and the most successful leaders are those that adapt their leadership style to the Maturity (the capacity to set high but attainable goals, willingness and ability to take responsibility for the task, and relevant education and/or experience of an individual or a group for the task") of the individual or group they are attempting to lead/influence. That effective leadership varies, not only with the person or group that is being influence, but it will also depend on the task, job or function that needs to be accomplished. The Hersey-Blanchard Situational Leadership Theory rests on two fundamental concepts; Leadership Style and the individual or group's Maturity level.

Leadership styles Hersey and Blanchard characterized leadership style in terms of the amount of Task Behavior and Relationship Behavior that the leader provides to their followers. They categorized all leadership styles into four behavior types, which they named S1 to S4:

High Relationship behavior Low Low

Maturity Level 3 Participating works best (High skill/Low will) Maturity Level 4 Delegating works best (High skill/High will) Task / skill level behavior

Maturity Level 2 Selling works best (Low skill/low Will) Maturity level 1 Telling works best ( Low skill/high will) High

S1: Telling - is characterized by one-way communication in which the leader defines the roles of the individual or group and provides the what, how, when, and where to do the task
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S2: Selling - while the leader is still providing the direction, he or she is now using twoway communication and providing the socioemotional support that will allow the individual or group being influenced to buy into the process. S3: Participating - this is now shared decision making about aspects of how the task is accomplished and the leader is providing less task behaviors while maintaining high relationship behavior. S4: Delegating - the leaders is still involved in decisions; however, the process and responsibility has been passed to the individual or group. The leader stays involved to monitor progress.

Of these, no one style is considered optimal for all leaders to use all the time. Effective leaders need to be flexible, and must adapt themselves according to the situation. Maturity Levels The right leadership style will depend on the person or group being led - the follower. The Hersey-Blanchard Situational Leadership Theory identified four levels of Maturity M1 through M4:

M1 - They generally lack the specific skills required for the job in hand and are unable and unwilling to do or to take responsibility for this job or task. M2 - They are still unable to take on responsibility for the task being done; however, they are willing to work at the task. M3 - They are experienced and able to do the task but lack the confidence to take on responsibility. M4 - They are experienced at the task, and comfortable with their own ability to do it well. They able and willing to not only do the task, but to take responsibility for the task.

Maturity Levels are also task specific. A person might be generally skilled, confident and motivated in their job, but would still have a Maturity level M2 when asked to perform a task requiring skills they don't possess. From the study, we may say that The Patterson Operation has already faced S-2 (selling) and S-3 (Participating) by Fred Hammond. It also faced S-4 (Delegating) by May Allison.

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Question-3: Comment on the informal organization at Patterson. In what ways did the employees create their own company? Answer: There were a lot of formalities at Section 10. Though there were a lot of modern facilities there but it was not profitable. So that a large portion of the assembly was transferred to The Patterson building. Though there werent modern facilities but the employees were satisfied and for their satisfaction they came to view Patterson as their own Company. We think, the Patterson operation exceeded its limit in case of informalization. It was more informal that It needed. Playing of radios in production areas at high volume may hamper the concentration of the employees. There was no definite uniform so that the security might be at risk. The behavior of employees at Patterson represents poor discipline. They hardly follow the rules of the management. Sometimes they made decisions by themselves and acted independently, without reference to overall company personnel policy. But these deficiencies were overlooked by low grievance rate, high level of worker morale, better productivity and effective direction. Otherwise it might turn to the worse situation than Section 10.

Employees own Company After getting the facilities from the authority the employees made The Patterson House as their own company in following ways:

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The employees were attempting to get the company to furnish some paint so that they could repaint the room. In order to have some place to eat or to take a break the employees got together and furnished a small room with enough tables and chairs to modestly equip a rather austere dining and rest break area. A feeling of mutual cooperation became prevalent as evidenced by the willingness of individual workers to assist others when possible. An esprit de corps developed among the Patterson workers. The jobs at Patterson became more popular and the composition of the work force there gradually changed from one of inexperienced and dissatisfied workers to one in which older and better qualified people (black and white) began to actively bid for the jobs. Another interesting development at Patterson is the formation of their own softball team called the Patterson Warriors which was composed of players of all units instead of one unit. With these and other changes a shift in worker attitudes began to evolve. Employees came to view Patterson as their own company.

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Question-4: Review Herzbergs two-factor model. Why didnt the change in physical working conditions (a deterioration of a hygiene factor) have a negative effect on productivity? What did cause the workers to be productive? Answer: Review of Herzbergs Two-Factor Model The two-factor theory (also known as Herzberg's motivation-hygiene theory) states that there are certain factors in the workplace that cause job satisfaction, while a separate set of factors cause dissatisfaction. It was developed by Frederick Herzberg, a psychologist, who theorized that job satisfaction and job dissatisfaction act independently of each other. Two-factor theory distinguishes between:

Motivators (e.g., challenging work, recognition, responsibility) that give positive satisfaction, arising from intrinsic conditions of the job itself, such as recognition, achievement, or personal growth and Hygiene factors (e.g. status, job security, salary and fringe benefits) that do not give positive satisfaction, though dissatisfaction results from their absence. These are extrinsic to the work itself, and include aspects such as company policies, supervisory practices, or wages/salary.

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We know that

Motivators

Hygiene Factors

Satisfaction

No Satisfaction

Dissatisfaction

No dissatisfaction

The change in physical working conditions didnt have a negative effective on productivity because the employees got the following advantages or motivators: Getting bonuses Opportunities of personal growth. Recognition Responsibility Achievement Independency. Cooperation. We know if hygiene factors are absent then dissatisfaction will be raise, if present there will be no dissatisfaction. Again for the above motivated factors the workers became productive too.

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References
Paul Hersey and Kenneth H. Blanchard, Management and Organizational Behavior (Englewood
Cliffs, NJ: Prentice-Hall, 1988).

Paul Hersey, The Situational Leader (Escondido, CA: Center for Leadership Studies, 1984). For an interview with Paul Hersey on the origins of the model, see John R. Schermerhorn, Jr.,
Situational Leadership: Conversations with Paul Hersey, Mid-American Journal of Business (Fall 1997), pp. 5-12.

See Claude L. Graeff, The Situational Leadership Theory: A Critical View, Academy of
Management Review, vol. 8 (1983), pp. 285-291, and the research summary in Gary Yukl, Leadership in Organizations, Sixth Edition (Upper Saddle River, NJ: Pearson, 2006), pp. 223225.

F. Dansereau, Jr., G. Graen, and W. J. Haga, A Vertical Dyad Linkage Approach to Leadership
Within Formal Organizations: A Longitudinal Investigation of the Role Making Process, Organizational Behavior and Human Performance, vol. 13, pp. 46-78.

Edwin E. Ghiselli, "Management Talent," American Psychologist, Vol. 18 (October 1963), pp. 631-41. Ralph M. Stogdill, "Personal Factors Associated with Leadership: A Survey of the Literature," Journal of Psychology, Vol. 25 (January 1948), pp. 35-71. Robert Tannenbaum and Warren H. Schmidt, "How to Choose a Leadership Pattern," Harvard Business Review, Vol. 36 (March-April 1958), pp. 95-101. Fred E. Fiedler, A Theory of Leadership Effectiveness (New York: McGraw-Hill Book Company, 1967), p. 147. Fiedler, "Engineer the Job to Fit the Manager," p. 115
Hersey, P. and Blanchard, K. H. (1969). Life cycle theory of leadership. Training and Development Journal, 23 (5), 2634. Hersey, P. and Blanchard, K. H. (1977). Management of Organizational Behavior 3rd Edition Utilizing Human Resources. New Jersey/Prentice Hall.

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